Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Gilbert A. Churchill, Jr. J. Paul Peter Chapter 14 Managing Distribution Channels Marketing

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 How Intermediaries Improve Channel Efficiency Slide 14-1 Figure 14.1 Sales Contacts without an IntermediarySales Contacts with an Intermediary Manufacturers of Bicycle Helmets Bike Riders Manufacturers of Bicycle Helmets Bike Riders Bike Shop Intermediary

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Common Channels for Consumer Goods Slide 14-2 Figure 14.2 Consumer Retailers Wholesalers Agents Direct Channel Producer Indirect Channels

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Common Channels for Consumer Goods - Examples Slide 14-3 Consumer Safeway Soft Drink Retailers Interstate Beverage Corporation Willow Rum Snapple Frito Lay Corky’s Bar-B-Q Retail Florists Wholesale Florists Small Houseplant Grower Consumer

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Types of Vertical Marketing Systems Slide 14-4 Figure 14.5 Wholesalers Sponsored Cooperatives Retailer Sponsored Cooperatives Franchising Administered VMSs Corporate VMSs Contractual VMSs Vertical Marketing Systems (VMSs)

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Three Categories of Contractual Vertical Marketing Systems Slide 14-5 McDonalds True-Value Hardware Independent Grocers Alliance (IGA) Franchises Wholesaler Sponsored Cooperatives Retailer Sponsored Cooperatives

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Factors to Evaluate for Selecting a Distribution Channel Slide 14-6a Figure 14.6 Customer Characteristics Product Characteristics Intermediary Characteristics Number Geographic Dispersion Channel Preferences Buying Behavior Use of Technology Cost per Unit Pershability Bulkiness Standardization Need for Installation and Maintenance Availability Willingness to Carry Product Market Serviced Distribution Functions Performed Potential for Conflict and Cooperation Other Product Offerings Financial Condition Strengths and Weaknesses

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Slide 14-6b Figure 14.6 Competitor Characteristics Environmental Characteristics Organization Characteristics Number and Size Distribution Strategies Financial Conditions Sizes of Product Lines, Product Mixes Objectives, Strategies and Budgets Strengths and Weaknesses Economic Conditions Political Issues Laws, Regulations and Ethics Cultural and Social Changes Technological Changes Size and Market Share Financial Condition Size of Product Lines, Product Mix Ability to Perform Distribution Functions Objectives, Strategies and Budgets Channel Experience Strengths and Weaknesses Factors to Evaluate for Selecting a Distribution Channel

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Levels of Market Coverage Slide 14-7 Table 14.2 LevelObjectiveExamples Electronic Liquid Fillers packaging systems; Rolex watches Work with a single intermediary for a product that requires special resources or positioning; distribute luxury goods effectively. Exclusive Selective Number of Intermediaries in Trading Area Intensive Work closely with intermediaries who meet certain criteria; distribute shopping goods effectively. Support mass selling; distribute convenience goods effectively. One Several Many Bose speakers; Compaq computer systems Classic Coke; disposable writing pens

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Channel Leadership Slide 14-8 Power Channel Captain Information Legitimate Reward Coercive Expert Referent

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Channel Options for Global Markets Slide 14-9 Global Markets License Foreign Manufacturers Domestic Manufacturers License Foreign Manufacturers Domestic Exporters Global Intermediaries Global Branches Table 14.8 Least Control Most Control

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Legal, Political and Ethical Issues Slide Exclusive DealingA restriction imposed by a supplier on a customer forbidding the customer from purchasing some type of product from any other supplier. Closed Sale TerritoriesA producer specifies a geographic area and assigns one intermediary to serve it. Tying ContractsAn agreement under which a marketer sells a particular product only if the buyer also purchases another specific product. Full Line ForcingA type of tying arrangement in which an intermediary that wants to carry a particular product must buy the entire line. Gray MarketThe situation in which foreign distributors sell foreign versions of U.S. products in the United States. Slotting AllowancesA fee paid by a manufacturer for space in a retail store.